Binary economics is a heterodox theory of economics that endorses both private property and a free market but proposes significant reforms to the banking system. The aim of binary economics is to ensure that all individuals receive income from their own independent capital estate^[1], using interest-free loans issued by a central bank to promote the spread of employee-owned firms.^[2] These loans are intended to: halve infrastructure improvement costs, reduce business startup costs, and widen stock ownership. Heterodox economics [1] refers to approaches or schools of economic thought that do not conform to mainstream economics, which has largely developed from neoclassical economics in the late 19th century. ... Face-to-face trading interactions on the New York Stock Exchange trading floor. ... This page deals with property as ownership rights. ... A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy... For other uses, see Bank (disambiguation). ... Employee-owned corporations are generally a model of ownership of a corporation where the corporation is owned in part or whole by the employees who work for it. ... For other uses, see Stock (disambiguation). ...

Binary economics is a minority discipline, hard to place on the left-right spectrum^[3]. It has variously been characterized as an extreme right-wing ideology and as extremely left-wing by its critics^[4][5]. The ‘binary’ (in ‘binary economics’) means ‘composed of two’ because it suffices to view the physical factors of production as being but two (labour and capital which includes land) and only two ways of genuinely earning a living − by labour and by productive capital ownership. Humans are usually considered as owning their labour, but not necessarily the other productive factor – capital.^[6] Left-Right politics is the traditional terminology used to describe the two ideological poles of a political spectrum in a society, especially in a democracy. ... Look up binary in Wiktionary, the free dictionary. ... In economics, factors of production are resources used in the production of goods and services, including land, labor, and capital. ... labor may refer to: Work of any kind Wage labor, in which a worker sells their labor and the employer buys it Manual labor, physical work done by people Childbirth, especially from the start of uterine contractions to delivery Labor (economics), one of the three main factors of production Labor... Not to be confused with capitol. ... A LAND attack is a DoS (Denial of Service) attack that consists of sending a special poison spoofed packet to a computer, causing it to lock up. ...

Binary economics is partly based on belief that society has an absolute duty to ensure that all humans have good health, housing, education and an independent income, as well as a responsibility to protect the environment for its own sake. The interest-free loans proposed by binary economics are compatible with the traditional opposition of the Abrahamic religions to usury.^[7] map showing the prevalence of Abrahamic (purple) and Dharmic (yellow) religions in each country. ... Look up usury in Wiktionary, the free dictionary. ...

Proponents^[8] of binary economics claim that their system contains no expropriation of wealth, and much less redistribution will be necessary. They argue that it cannot cause inflation and is of particular importance as more of the physical contribution to production is automated.^[9] and that the Binary economics paradigm^[10] is particularly helpful in addressing the issue of why developing countries languish.^[11] Advocates^[12] contend that implementing their system will lessen national debt and encourage national unity. They believe binary economics could create a stable economy. Expropriation is the act of removing from control the owner of an item of property. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... Robots may refer to: Robot, an dogs-mechanical or bio-mechanical device Robots (film), a computer-animated film Robots (video game), based on the movie Robots (novel), a science fiction novel by Isaac Asimov Robots (J-Pop) Robot (disambiguation) Category: ...  High human development Medium human development Low human development Unavailable (colour-blind compliant map)   Developing countries not listed as least developed countries or as newly industrialized countries, in their respective articles. ... // [edit] Introduction [edit] Definition If we were to take snapshots of an economy at different points in time, no two photos would look alike. ...

In its intent to involve people in ownership and participation binary economics has affinity with distributism and with the worker cooperatives of the Emilia-Romagna region of Italy and the Mondragón Cooperative Corporation of Spain. Distributism, also known as distributionism and distributivism, is a third-way economic philosophy formulated by such Roman Catholic thinkers as G. K. Chesterton and Hilaire Belloc to apply the principles of social justice articulated by the Roman Catholic Church, especially in Pope Leo XIIIs encyclical Rerum Novarum[1] and... A worker cooperative is a cooperative owned and operated by its worker-owners. There are no outside, or consumer owners, in a workers cooperative - only the workers own shares of the business. ... Emilia-Romagna is one of the 20 Regions of Italy. ... Mondragón Cooperative Corporation (MCC) is a group of manufacturing and retail companies based in the Basque Country and extended over the rest of Spain and abroad. ...

Background

Although elements of binary economics can be found elsewhere (for example, in Pope Leo XIII Rerum Novarum 1891; Harold Moulton (1935) The Formation of Capital; the Distributism of G. K. Chesterton and Hilaire Belloc; and Ibn Ashur (1946) Maqasid al Shari’ah al Islamiya) the first clear formulation of the subject was by American lawyer Louis Kelso and Mortimer Adler (the Aristotelian philosopher and educator) in their book The Capitalist Manifesto (1958). The title of the book is best viewed as a thing of its time being a Cold War reference in opposition to communism. Rerum Novarum (Translation: Of New Things) is an encyclical issued by Pope Leo XIII on May 15, 1891. ... Distributism, also known as distributionism and distributivism, is a third-way economic philosophy formulated by such Roman Catholic thinkers as G. K. Chesterton and Hilaire Belloc to apply the principles of social justice articulated by the Roman Catholic Church, especially in Pope Leo XIIIs encyclical Rerum Novarum[1] and... Gilbert Keith Chesterton (May 29, 1874–June 14, 1936) was an influential English writer of the early 20th century. ... Photograph of Belloc Joseph Hilaire Pierre René Belloc (27 July 1870 – 16 July 1953) was one of the most prolific writers in England during the early twentieth century. ... Louis O. Kelso (1913-1991) was a lawyer and economic thinker who sought to find a way to preserve capitalism from the competition of communism as an alternative within the context of the early Cold War. ... Mortimer Adler around 1963 Mortimer Jerome Adler (December 28, 1902 – June 28, 2001) was an American aristotelian philosopher and author. ... For other uses, see Cold War (disambiguation). ... This article is about the form of society and political movement. ...

Kelso and Adler continued to write together - The New Capitalists (1961) contributes greatly to the understanding of collateral and capital credit insurance - and then Kelso teamed up with political scientist Patricia Hetter Kelso to explain how capital instruments provide an increasing percentage of the wealth and why capital is narrowly owned in the modern industrial economy.^[13] Their analysis predicts that widely distributed capital ownership will create a more balanced economy. This is at the heart of the binary claim to create an efficiency which creates justice and vice versa.

Kelso and Hetter then proposed new binary share holdings which (with exception for research, maintenance and depreciation) would pay out their full capital earnings, be capable of being insured and, if loss occurred, would occasion no recourse to the new binary owners. Because of the full payout provision they argued that binary holdings would yield more than five times what is typically paid out today. In the binary economics plan, this improved payout would allow a new widespread capital ownership, and achieve individual incomes which could be possessed by anybody. Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ...

Employee Share Ownership Plans (ESOPs) and other Plans

Very often the first acquaintance people have with binary economics comes through today’s Employee Share Ownership Plans (ESOPs).^[14] These stem originally from Louis Kelso & Patricia Hetter Kelso (1967)Two-Factor Theory: The Economics of Reality; the founding of Kelso & Company in 1970; and then from conversations in the early 1970s between Louis Kelso, Norman Kurland (Center for Economic and Social Justice), Senator Russell Long of Louisiana (Chairman, USA Senate Finance Committee, 1966 - 1981) and Senator Mike Gravel of Alaska. There are about 11,500 ESOPs in the USA today covering 11 million employees in closely held companies. As Binary Economics predicts, some studies have shown productivity improvements as an effect of employee ownership^[15] and involvement - binary techniques for this are called Justice Based Management. Employee-owned corporations are generally a model of ownership of a corporation where the corporation is owned in part or whole by the employees who work for it. ... Russell Long is the coolest 16 year old this side of the west side yo. ... Maurice Robert Mike Gravel (IPA: ) (born May 13, 1930), is a former Democratic United States Senator from Alaska, having served for two terms, from 1969 to 1981. ...

Conventional economics compared with binary economics - areas of conflict, criticism and contrast

A good understanding of binary economics can be obtained by contrasting various aspects with comparable aspects in conventional economics (especially mainstream Neoclassical economics). The first contrast is that mainstream academic economics is primarily 'positive economics' (the analysis of 'what is') where binary economics proposes an economic system that ‘ought to be’ ('normative economics'). However, binary productiveness analysis is claimed to be a superior account of reality (‘what is’) than classical positive economics. Neoclassical economics refers to a general approach (a metatheory) to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. ... Positive economics, value-free economics or wertfrei economics (from the German wertfrei, meaning value-free) is the part of economics that focuses on facts and cause-and-effect relationships. ... Normative economics is the branch of economics that incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal. ...

Conventional economics upholds productivity^[16] which is not a direct analysis of physical reality: rather it is the calculation of a ratio or rate of total output divided by unit of input (though usually having separate labour & capital goods input-components, e.g Cobb-Douglas). In contrast, the binary analysis of productiveness (see section below) attempts to give accurate credit to the physical contributions of both labour and capital goods to production, attempting to answer a fundamental economic question - Who or what physically creates the wealth? In economics, the Cobb-Douglas functional form of production functions is widely used to represent the relationship of an output to inputs. ...

The third contrast is that conventional economics believes that interest (as distinct from administration cost) is always necessary; in Binary Economics theory it isn't (certainly where the development and spreading of productive capacity is concerned).^[17] For other senses of this word, see interest (disambiguation). ...

For newly-created money, conventional economics upholds the doctrine of the time value of money whereas binary economics doesn't apply the principle to fiat money. The time value of money is the premise that an investor prefers to receive a payment of a fixed amount of money today, rather than an equal amount in the future, all else being equal. ... Fiat money or fiat currency, is money that is current or legal tender as satisfaction for money debts by government fiat, that is by law. ...

An assumption of general scarcity is at the heart of conventional economics. Binary economics, however, denies the assumption. Amartya Sen argued that starvation is primarily due to lack of money in the hands of the starving and not the absence of food: thus it is human attitudes, practice and institutions which are at fault. In economics, scarcity is defined as a condition of limited resources, where society does not have sufficient resources to produce enough to fulfill subjective wants. ... Amartya Kumar Sen CH (Hon) (Bengali: Ômorto Kumar Shen) (born 3 November 1933), is an Indian economist, philosopher, and a winner of the Bank of Sweden Prize in Economic Sciences (Nobel Prize for Economics) in 1998, for his contributions to welfare economics for his work on famine, human development theory...

Binary economics also rejects conventional financial savings doctrine (that there must be financial savings prior to investment) - no financial saving is necessary if money can be created out of nothing.^[18] The theory asserts that what matters is whether the newly-created money is interest-free, whether it can be repaid, whether there is effective collateral and whether it goes towards the development and spreading of various forms of productive (and the associated consuming) capacity. Collateral within a financial context is used to indicate assets that secure a debt obligation. ...

The contrast continues: Unlike Binary economics, conventional economics is largely unconcerned that the present money supply is generally not directed at the spreading of productive capacity -- broadly, productive capital is narrowly owned^[19]. Wealth condensation is a theoretical process by which, in certain conditions, newly-created wealth tends to become concentrated in the possession of already-wealthy individuals or entities. ... In macroeconomics, money supply (monetary aggregates, money stock) is the quantity of currency and money in bank accounts in the hands of the non-bank public available within the economy to purchase goods, services, and securities. ...

Very fundamentally, binary economics rejects the claim of conventional economics that it promotes a ‘free market’ which is free, fair and efficient. (e.g., as an interpretation of the classical First Fundamental Theorem of Welfare Economics). A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy... General Equilibrium (linear) supply and demand curves. ...

The two economics differ on the subject of democracy. Conventional economics upholds the periodic political vote. Binary economics does the same but then deepens democracy^[20] by insisting that productive capital and the practical everyday power its ownership gives to individuals be widely distributed as well. In binary economics freedom is only truly achieved if all individuals are able to acquire an independent economic base.

On environmental issues, binary economics claims to have a big advantage over conventional economics because of the interest-free loans which would be available. (See Environment section below.) The appropriate (non-zero) interest rate dominates conventional economic analysis of environment policy (e.g. in tackling climate change). Sir Nicholas Stern, author of the report. ...

Uses of Central Bank-issued Interest-free Loans

Binary economics proposes that central bank-issued interest-free loans should be administered by the banking system for the development and spreading of productive (and the associated consuming) capacity, particularly new capacity, as well as for environmental and public capital. While no interest would be charged, there would be an administrative cost as well as collateralization or ====capital credit insurance.^[21]

Binary economics is concerned that the banking system 'creates new money out of nothing' by issuing more credit than it has reserves.^[22] The supply of interest-free loans takes place in circumstances of a move (over time) towards banks maintaining reserves equal to 100% of their deposits. Thus banks would be confined to lending depositors’ money (and the bank’s own capital) & administering the interest-free loans. Some binary economists propose that under binary principles, the International Monetary Fund and its Special Drawing Rights could allow everyone in the world capital ownership. In economics, particularly in financial economics, fractional-reserve banking is the near-universal practice of banks of retaining only a fraction of their deposits and notes as reserves to satisfy demands for withdrawals, investing the remainder at interest to obtain income that can be used to pay interest to depositors... The capital requirement is a bank regulation, which sets a framework on how banks and depository institutions must handle their capital. ... IMF redirects here. ... Special Drawing Rights (SDRs) is a potential claim on the freely usable currencies of International Monetary Fund members. ...

Not all investments would qualify for the interest-free loans; the development and spreading of new productive capacity would be targeted. For example, the loans would not be available to home buyers, since this would accelerate asset inflation. Assets inflation is an economic phenomenon denoting a rise in price of assets, as opposed to ordinary goods and services. ...

Investments eligible for interest-free loans

Public Capital Investment Interest-free loans would allow hospitals, sewage works, social housing, roads, bridges etc. to be built at half or less of the present cost. (This use is also advocated by the USA Sovereignty movement - Dennis Kucinich, Ken Bohnsack et al.). However, the capital projects can still, if wished, be built, managed, even owned, by the private sector and use made of Community Investment Corporations and the like. In these Corporations local citizens own the local land and get the rents from it.^[23] Dennis John Kucinich (IPA: ) (born October 8, 1946) is an American politician of the Democratic party and a candidate for the Democratic nomination for President of the United States in both 2004 and 2008. ...

Interest-free loans for public capital have been successfully used in Canada, New Zealand and Guernsey. Malaysia is today believed to be experimenting with them.^[24]

After 1949 central bank loans were a major factor in the Taiwanese Land to the Tiller program which spread land ownership from the few to the many. This was done without causing inflation and was an overall binary solution because, in various ways the money went into the spreading of both productive and consuming capacity.^[25] (One way was by financing the buyout with industrial bonds, thus giving capital to small industries to provide things for the newly empowered farmers to purchase.) Land to the Tiller can just be a generic slogan for land reform, but it has been the official name of certain land reform programs: Land to the Tiller (South Vietnam) in South Vietnam in 1970 at the height of the Vietnam War. ...

Private Capital Investment Ownership of productive (and the associated consuming) capacity, particularly new capacity, can be spread by the use of central bank-issued interest-free loans.^[26] Interest-free loans should be allowed for private capital investment IF such investment creates new owners of capital and is part of national policy to enable all individuals, over time, on market principles, to become owners of substantial amounts of productive, income-producing capital.^[27] By using central bank-issued interest-free loans, a large corporation would get cheap money as long as new binary shareholders are created.

It is proposed that all large corporations should have to pay out all their earnings all the time (with exception of reserves for maintenance, depreciation, repair and research). Large corporations will then have the option of obtaining interest-free loans on condition that they help to spread ownership. Medium-sized corporations (which would not be subject to the full pay out provision) will be able to have interest-free loans if they spread ownership.

‘Green’ Environmental Capital Investment Interest-free loans should be used, in particular, for clean, renewable energy. At present, a lot of green power-generating projects are not financially viable, but they would be with interest-free loans. Much more clean electricity could then be provided (e.g. by tidal barrages, wave machines, wind turbines, solar electricity, and geothermal power stations). A tall tower holds a wind turbine aloft where winds are consistently stronger. ... Wikipedia does not have an article with this exact name. ... Krafla Geothermal Station in northeast Iceland Geothermal power (from the Greek words geo, meaning earth, and therme, meaning heat) is energy generated by heat stored beneath the Earths surface. ...

There are many 'alternative' technologies - at present viewed with varying degrees of skepticism by mainstream science - that, in principle, would be eligible for research and development funding under binary economics. Some of these technologies, if physically possible, would enable the clean generation of electricity for cars, houses, trains and factories and they can be found among the Top 100 Technologies which are a mixture of that which lies within, on the edge of, and outside existing science e.g., Blacklight Power (Randell Mills); and Steorn. Randell L. Mills (born September 3, 1957) is a U.S. scientist and inventor best known as the chief proponent of the controversial hydrino theory. ... Randell L. Mills (born September 3, 1957) is a U.S. scientist and inventor best known as the chief proponent of the controversial hydrino theory. ... Steorn Ltd. ...

Small and Start-up Businesses Including Microfinance Interest-free loans should be used for micro-finance, small business and farms thereby freeing them from the huge pressure of compounding interest-bearing debt. Farm capital can be one half or less of the usual cost. The world’s poor people (e.g., Bangladesh women^[28] - 55% of the world's population live on under $3 per day) could be enabled to halve or more the cost of building small businesses by the use of interest-free micro-finance being funnelled through the Grameen Bank and similar institutions such as the Institute for Integrated Rural Development. The Grameen Bank (Bangla: গ্রামীণ ব্যাংক) is a microfinance organization and community development bank started in Bangladesh that makes small loans (known as microcredit) to the impoverished without requiring collateral. ...

Loans to Students It is binary policy that, since further and higher education should be encouraged, student loans should not bear interest.

Productiveness

Binary productiveness and conventional productivity are distinct concepts.^[29]

Conventional productivity, generally labour productivity, is the ratio of labor as input to the overall output.^[30]

In contrast, binary productiveness is the percentage of total physical input that labor and capital each contributes to the output.^[31] Capital contributes an increasing physical percentage as even Marx understood.^[32] Consider the example of a man digging a hole. Using his hands this takes him four hours. But, by using a form of capital − a shovel − he can dig the hole in one hour or dig four holes in the same amount of time it took him to dig one hole with his hands. The physical productiveness of the human labor is 25% while the physical productiveness of the capital shovel is 75%.

A criticism of the hole and shovel example has been made by Timothy D. Terrell^[33] summarizing a critique given by Timothy Roth.^[34] The criticism states that: a) somebody invented the shovel; b) the shovel cannot be independent. Roth argues that someone with human capital had to invent the shovel before it could be used, so the presence of the shovel is not independent of human capital. Also, Roth notes the presumption that the human hole digger has no role in the productiveness of the shovel.

However, binary economics states that the fact that somebody invented the shovel has nothing to do with its present use for digging a hole and the shovel is viewed as an independent contributor which co-operates with the man just as the man co-operates with the shovel. Moreover, just as two humans can co-operate, so the man and the shovel co-operate to dig the hole and produce far more holes than either the man or shovel could do by themselves.

Estate duty

As part of binary policy to develop capital ownership for each member of the population, there is no estate duty (or Inheritance tax) on death if the estate devolves in such a way as to spread capital estates to more individuals. If it does not do so, binary economics proposes a graduated tax. The examples and perspective in this article or section may not represent a worldwide view. ...

Selected External Links

• Binary Economics now
• Center for the Study of The Great Ideas
• Binary Economics In A Nutshell
• Center for Economic and Social Justice
• Global Justice Movement Net
• Global Justice Movement Org
• Integrating Islamic Finance into Mainstream
• Binary Economics - An Overview by Professor Robert Ashford
• The Binary Alternative & The Future of Capitalism
• The Binary Economics of Louis Kelso
• http://ssrn.com/abstract=277508
• http://www.cesj.org/binaryeconomics/price-money.html
• http://cog.kent.edu/lib/TurnbullBook/TurnbullBook.htm
• Capital Democratization
• Committee on Monetary & Economic Reform

Selected Texts

• Albus, James S.(1976) Peoples’ Capitalism - The Economics of The Robot Revolution.

• Ashford, Robert & Shakespeare, Rodney (1999) Binary Economics - the new paradigm.

• Ashford, Robert Louis Kelso’s Binary Economy (The Journal of Socio-Economics, vol. 25, 1996).

• el-Diwany, Tarek (2003) The Problem With Interest.

• Gates, Jeff (1999) The Ownership Solution.

• Gates, Jeff (2000) Democracy At Risk.

• Gauche, Jerry Binary Modes for the Privatization of Public Assets (The Journal of Socio-Economics. Vol. 27, 1998).

• Greenfield, Sidney M. Making Another World Possible: the Torah, Louis Kelso and the Problem of Poverty (paper given at conference, Colombia University, May, 2006).

• Kelso, Louis & Kelso, Patricia Hetter (1986 & 1991), Democracy and Economic Power - Extending the ESOP Revolution through Binary Economics.

• Kelso, Louis & Adler, Mortimer (1958), The Capitalist Manifesto.

• Kelso, Louis & Adler, Mortimer (1961), The New Capitalists.

• Kelso, Louis & Hetter, Patricia (1967), Two-Factor Theory: the Economics of Reality.

• Kurland, Norman A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation.

• Kurland, Norman; Brohawn, Dawn & Michael Greaney (2004) Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security.

• Miller, J.H. ed., (1994), Curing World Poverty: The New Role of Property.

• Reiners, Mark Douglas, The Binary Alternative and Future of Capitalism.

° Schmid, A. Allan,(1984), “Broadening Capital Ownership: The Credit System as a Focus of Power," in Gar Alperovitz and Roger Skurski,eds. American Economic Policy, University of Notre Dame Press.

• Shakespeare, Rodney & Challen, Peter (2002) Seven Steps to Justice.

• Shakespeare, Rodney (2007) The Modern Universal Paradigm.

• Turnbull, Shann (2001) The Use of Central Banks to Spread Ownership.

• Turnbull, Shann (1975/2000), Democratising the Wealth of Nations.

References